This is a partial transcript from "The O'Reilly Factor," May 11, 2004 that has been edited for clarity.

Watch The O'Reilly Factor weeknights at 8 p.m. and 11 p.m. ET and listen to the Radio Factor!

TONY SHOW, GUEST HOST:  In the "Unresolved Problem" segment tonight, former New York City Mayor Rudy Giuliani is set to testify next week before the 9/11 Commission.  Also, the mayor has been speaking out on the dangers of buying pharmaceutical drugs online and importing them from  other countries.  The mayor joins us now from New York.  Mayor, welcome. 

RUDY GIULIANI, FMR. NEW YORK CITY MAYOR:  Thanks, Tony. 

SNOW:  Before we get to the other topics, I want to get your reaction to the gruesome video that surfaced today, the beheading of American businessman Nick Berg in Iraq apparently by Al Qaeda members?

GIULIANI:  I think the reaction is shock and horror and a reminder of what we're facing in Iraq, a horrific reminder because we've had these before of the kind of evil and the kind of terrible hatred that we're faced with, and the reality of how important it is for us to remain consistent to our purpose, to destroy terrorism, to disrupt international terrorism, and to try and make the whole situation in Iraq come out with a decent government and an accountable government at the end.

I mean, I can't think of anything more gruesome than what -- at least a part of it that I witnessed just a short while ago. 

SNOW:  Mayor, do you think that this was designed to break our will?

GIULIANI:  Yes, I think from the very beginning, all of this has been designed to break our will.  I've always thought that the attacks of September 11, 2001 were intended to kill a lot of people.  And tragically, they succeeded in doing that.

And the second thing they wanted to do was prove that we're not a determined people, that we really don't understand the value of freedom, the value of democracy, that we're a weak people.  And I think the brave reaction of the men and women who responded on September 11, 2001, both the firefighters, the police officers, and the  civilians, kind of stopped that and turned it in the other direction.

And the way in which our military has handled itself has also shown us a kind of example of bravery and determination.  So they are not going to break our will, but they certainly are going to inflict an awful lot of pain on us. 

SNOW:  On the other hand, you just mentioned the military.  One of the responses, I think, is probably going to be that we're going to hit back and hit back hard.  Do you think that is what the military ought to do right now, to send a message to Al Qaeda and anybody who might be inclined to support them in Iraq?

GIULIANI:  Yes, these people only respect an exercise of power.  This isn't about some kind of, you know, liberal democracy that you can negotiate with or even authoritarian regime that had some pillars of democracy in law.  And these are people who understand the exercise of power.  And they have to be deterred.  I mean, they have to be stopped before they can act, which is the  whole purpose of the war on terrorism in the first place.  So this is a horrible reminder of what it's all about, but it's really an application of it.

SNOW:  Mayor, you've also heard, no doubt, the comparisons  between the Abu Ghraib photos, where Americans clearly abused Iraqi prisoners, making them parade around naked in degrading conditions and this. --  Does this serve as a reminder? It certainly does to me that even at our worst, we're far better than these guys?

GIULIANI:  Yes, no moral equivalent here.  And I think people should be very careful not to draw moral equivalence.  You know, what we saw in the prisons, and they're in -- at the stage of allegations, certainly very disturbing, certainly unacceptable, and  something that should not be allowed and should be stopped.  A far cry from, you know, what we've witnessed now.

This is utter, total, complete barbarity.  And it gives you a sense of what we're facing.  So, you know, it doesn't mean that we shouldn't make certain that we comport ourselves in a way that lives up to our high standards, but we're talking about two very different things here. 

SNOW:  We've also seen a bizarre situation in Washington where the political tempers have been running very, very high.  After September 11, we pulled together.  Do you think this video might be enough to bring at least some of the politicians of both parties back to their senses for a while?

GIULIANI:  I hope so because in a way this is a reminder of what, you know, September 11, 2001 and the attacks were all about.  The attack on us because of our way of life and message that are so barbaric that they are beyond anything that could be contemplated.

I hope they will.  Unfortunately, you know, we're in -- fortunately or unfortunately, depending on how you look at it, we're in the middle of a presidential  election.  And therefore, the desire to create problems, create issues is kind of out there.  But I hope we can, you know, get beyond  that.  There are plenty of other things to argue about in this presidential election than, you know, what just happened in Iraq. 

SNOW:  Do you think there's a major difference between how  President Bush is handling the war on terror and how John Kerry might?

GIULIANI:  Well, I think there was a major difference in the sense that President Bush has been very consistent.  It's very clear whether people agree with him or disagree with him since September 20, 2001, he's made it very clear that he's going to wage war against  terrorism, that he considers it a war, and that we have to do everything we can to end global terrorism.

Senator Kerry's positions, I think even from my partisan  perspective, have been, you know, considerably more inconsistent.  He's been on several different sides of the issue.  So it's far different than the kind of consistent leadership that President Bush has offered. 

SNOW:  All right, Mayor Giuliani, stand by.  By the way, you mentioned September 20, 2001 speech, where the president also remarked that this is a battle of good and evil.  We got a further reminder of that today.

GIULIANI:  Sure.

We're going to have more of former New York City Mayor Rudy Giuliani coming up. 

(COMMERCIAL BREAK)

SNOW:  Continuing now with former New York City Mayor Rudy Giuliani.

Mayor, you're going to be speaking to the 9/11 Commission next week.  What are you going to talk about?

GIULIANI:  Well, I'm going to talk about what happened that day, at least my perspective on it, and some of the things that I think, you know, we learned from it, things that were done right, the things that can be improved, the things that we're now aware of.

I've already spent about four hours being interviewed by them.  So they have a pretty good sense, you know, of what I'm able to contribute.  So it's essentially going to be hopefully, you know, as constructive as possible about what we have to be aware of in the future, not only to prevent events like that, but also to remediate them to deal with them, to handle them and all the different aspects of it. 

SNOW:  One of the key questions is intelligence sharing.  As you know, there was a wall erected between domestic and foreign  intelligence.  And at one point, people literally across the street from one another in New York City were unable to share information about two key Al Qaeda operatives.

Are you satisfied to this point that the moves made by the Bush administration have resolved that so that not only can FBI agents talk to one another, but people in New York City, including the police  department...

GIULIANI:  Sure.

SNOW:  ...will be in on the important information?

GIULIANI:  Well, that wall also would prevent the disclosure by  the FBI of information gathered by counter intelligence to share it with police, whether it'd be in New York or Chicago or any place else.  And sometimes the police have the best perspective in being able to  analyze it.

The Patriot Act broke down that wall or at least created a  process for doing it.  So it's very, very important that we continue The Patriot Act.  And I hope that one of the recommendations of the  commission is going to be that that wall be continued to be broken down and that it remain that way, that it become permanent. 

SNOW:  I think given the presence of Jamie Gorelick (search) on the panel, they've been pretty quiet on it and probably not likely to say a whole lot.  Is it your sense the Patriot Act (search) ought to be renewed without changes?  Or does it need changes?

GIULIANI:  Well, I think the Patriot Act should be renewed.  I think that the major provisions of the Patriot Act are all absolutely  necessary, particularly breaking down this wall, and giving more of an ability to monitor and watch what these people are doing.

I mean, after all, the best answer in the future is finding out about a terrorist attack before it happens.  Everything else is playing  catch up.  And it's always going to be imperfect, no matter, you know, no matter what the response. 

SNOW:  Now how about the argument that first responders, police and fire are getting shortchanged?

GIULIANI:  Well, you know, I think that that's the area where we have to do a lot of work.  It's not -- I don't think they're being  shortchanged.  I think they're being given a lot of help, a lot of support.  Could they use more?  Absolutely.  But is it the most complex system in the world because we elect for good reason to have this sort of diverse system of law enforcement and public safety?  Yes, it is.  I mean, it's a very complex thing.  You've got literally thousands and thousands and thousands of police departments, fire departments.

To make sure they all have what they need is not an easy task.  I think the Department of Homeland Security has moved in that direction, but it's -- you know, it can't be done quickly. 

SNOW:  Mayor, you are no stranger to political controversy.  Now you're getting into the issue of drug importation.  You are arguing that there ought to be safeguards against drugs purchased over the Internet or brought in from foreign countries.

You know and I know a lot of people want drug importation from Canada because those drugs are cheaper.  And the argument I have heard is they're every bit as safe as the United States.  Why are you standing in the way?

GIULIANI:  Well, the reality is we're doing a study, my company is, Giuliani Partners.  We do security work, myself, the former police commissioner, Bernard Kerik (search).  It's also an area we know a lot about having before being mayor, done a lot of work in dealing with the importation of illegal drugs.

I mean, the reality is that there are dangers.  All you have to do is go to Kennedy Airport and do the survey that we just did, and see that only 5 percent of the medicines that come into the United States are inspected.  40,000, 50,000 packages come in a day.  300 and 400 are inspected.

And among those that are inspected, you have expired medicines, you have medicines that appear to be counterfeit medicines, you have medicines that are less than the required dosage.

And the truth is in Canada, our survey -- and at least to this point it's an interim study, reveals that in Canada the safeguards that exist for Canadians that buy in Canada do not exist for Americans who get medicines from Canada.  The Canadian government refuses   to stand behind them.  The Canadian pharmacies that we've looked at require a waiver signed by an American if you want to get drugs from them.

So imagine if you went into your pharmacy to get the  prescription your doctor just gave you for antibiotics, and your pharmacist handed you a waiver in which you had to say  -- or had to agree that if this is not the medicine that was prescribed, if it's totally different or dangerous, you have no recourse against the  pharmacist?

SNOW:  In other words, they're saying that that medicine might be -- that you're getting lemons. 

GIULIANI:  Well and you have to sign a waiver.  I mean, if an American pharmacist presented you with that waiver, you'd go down to the next pharmacy.

SNOW:  Absolutely right.

GIULIANI:  Or you'd go to the pharmacy two blocks away because you want to make certain you're getting the medicine that's been prescribed.

SNOW:  All right.

GIULIANI:  Even given the system that exists, that certainty isn't  there.  And you can't pretend that away. 

SNOW:  All right, Mayor Giuliani, thanks so much.

GIULIANI:  Thank you.

Copy: Content and Programming Copyright 2004 Fox News Network, L.L.C. ALL RIGHTS RESERVED. Transcription Copyright 2004 eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, L.L.C.'s and eMediaMillWorks, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.